What is a Personal Services Business (PSB) risk for IT consultants?

If you are an incorporated IT consultant working primarily for one client, the CRA may classify you as an 'incorporated employee' or Personal Services Business (PSB). This strips away your small business tax deductions and severely limits your write-offs. We help structure your contracts and operations to mitigate this massive tax risk.

Should IT consultants incorporate?

Incorporating provides liability protection and significant tax deferral opportunities if you are earning more than you need for personal living expenses. We analyze your specific income level to determine if incorporation makes financial sense.

What expenses can an IT consultant write off?

Common write-offs include home office expenses (internet, utilities, rent/mortgage interest), hardware and software purchases, professional development and certifications, travel, and meals/entertainment for client meetings.

Do I need to charge GST/HST to US clients?

If you are providing IT consulting services to a US-based client, the service is generally considered a 'zero-rated export'. This means you charge 0% HST, but you can still claim Input Tax Credits (ITCs) on your Canadian business expenses.

Tech & Software

Accounting for
IT Consultants.

Maximize your take-home pay, avoid the CRA's Personal Services Business (PSB) trap, and optimize your corporate tax structure.

Book a Strategy Session

Bulletproof your contracts against CRA audits.

The Financial Complexities of IT Contracting

You write brilliant code. We write brilliant tax strategies. Don't let the CRA take more than their fair share of your consulting revenue.

PSB Risk Mitigation

Working for a single client? The CRA might classify you as an incorporated employee. We review your contracts to ensure you maintain independent contractor status.

Salary vs. Dividend

Should you pay yourself a T4 salary or T5 dividends? We calculate the mathematically optimal mix to minimize your tax while building RRSP room.

Cross-Border Tech

Consulting for Silicon Valley startups? We handle zero-rated GST/HST exports, W-8BEN forms, and ensure you aren't double-taxed by the IRS.

The PSB Trap: A Consultant's Biggest Risk

As an independent IT consultant or software developer, you have incredible earning potential. However, the Canada Revenue Agency (CRA) aggressively targets independent contractors who act like employees.

If the CRA determines that your corporation is a Personal Services Business (PSB), you lose access to the Small Business Deduction (SBD), face a punitive corporate tax rate (often exceeding 44%), and are stripped of almost all your business expense deductions. The resulting back taxes and penalties can be devastating.

How We Protect You

At Teixeira Accounting, we proactively review your Master Services Agreements (MSAs), invoicing practices, and operational structure. We ensure you meet the CRA's tests for independence (control, ownership of tools, chance of profit/risk of loss) to mitigate PSB risk before the CRA ever knocks on your door.

Expense Maximization

We ensure you capture every eligible deduction to lower your corporate tax base. From home office use (rent, utilities, internet) to tech hardware depreciation (Capital Cost Allowance on servers, laptops, and software), we leave no deduction behind.

Personal Services Business (PSB) Tax Penalty Estimator

See the devastating financial impact if the CRA classifies your IT consulting corporation as a PSB.

Annual Gross Consulting Revenue$150,000

Annual Business Expenses$25,000

If classified as a PSB, almost all of these deductions are denied by the CRA.

Simulate CRA PSB Audit Reassessment

Standard Corporate Tax (CCPC)$15,250

PSB Penalty Tax Rate$64,525

Potential Tax Risk$49,275

Toggle the switch to see what happens if you fail a PSB audit.

This tool is for general information only and does not replace professional tax or accounting advice.

Why Teixeira Accounting for Tech?

You are building complex systems for your clients; you shouldn't have to build your own accounting systems from scratch. We provide a fully digital, paperless accounting experience that matches the modern way you work.

We don't just file your year-end taxes. We act as your strategic financial partner, advising you on how to invest the surplus cash inside your corporation, when to transition from a sole proprietorship to a corporation, and how to plan for long-term wealth accumulation.

The Teixeira Accounting Advantage

Cloud-Native Stack

We use Xero, QuickBooks Online, and Dext to automate your receipt capture and bookkeeping.

Proactive Tax Planning

We don't wait until tax season. We plan your corporate dividends and salary distributions well in advance.

Bulletproof Compliance

If the CRA audits your PSB status or GST/HST filings, we handle the correspondence and defend your position.

IT Consultant Accounting FAQs

Protect Your Consulting Income.

Don't risk a PSB classification. Let our CPAs optimize your corporate structure and tax strategy today.

Book Your Consultation

Accounting for IT Consultants.